Selloffs continue in global markets

The selling has continued unabated in London this afternoon, testing lows last seen in mid-March. As we head into the close, the FTSE 100 is down 50 points, having shed 110 points since Friday.

ECB playing down expectations

The emphasis remains to the downside for global markets at the moment. The European Central Bank, which had bolstered hopes of fresh monetary policy last week, has been busily playing down expectations, suggesting that no change in policy will be forthcoming. Meanwhile, noises from the Ukraine indicate another situation may be developing there, as popular discontent in the east of the country builds against the government in Kiev. 

We’re seeing long-term trends come under severe pressure in the UK today, with even the solid dividend-paying stocks unable to escape the carnage. Major names like BT, Associated British Foods and Hargreaves Lansdown have all taken a hit, while the improved manufacturing and industrial production data from the UK has done little to reassure the mid-cap UK-focused index. In addition, the recent IPOs are firmly out of favour, with AO, Just Eat and all dropping below their float prices. Racy internet stocks are no longer the place to be, it seems.

Traders await earnings season

The shakeout in US markets continues as well, with only tentative gains being made in early trading. The imminence of US earnings season will be playing a part here; investors might believe there is still plenty of room for growth in the US economy, and thus lots of mileage left in the tank for the stock market rally, but it appears they’d rather sit on the sidelines unless, and until, a clear trend from the upcoming reporting period emerges. Warnings from the IMF about emerging market economies are adding to the gloom. Especially given that most of these ‘new’ economies are now much more integrated into the global scene than they were ten years ago. So long as the late-March lows in the Dow Jones and S&P 500, investors can retain a degree of calm. The time to worry has not arrived, yet.

Gold moves above $1300

Gold has enjoyed a move above $1300 today, taking it to levels not seen for two weeks. Dollar weakness is undoubtedly playing a part here, and we are seeing silver push above $20 as well. On a longer-term view, however, it seems difficult to imagine that the yellow metal will sustain real gains from this point onwards. Those with longer memories will note that the second quarter of 2013 saw gold slump from $1600 almost to $1300, driven by a variety of factors. Although these are now absent, the prospect of Fed tightening during 2015 and the absence of fresh QE from other central banks means there is precious little reason for gold to be pushed here from current levels.

Cable boosted by economic data

Sterling has been the day’s star performer in the FX sphere, following positive manufacturing and industrial production data and a boost from the IMF. The morning’s economic data came in well ahead of expectations, giving GBP/USD its first boost, sending it firmly through the $1.67 level. The IMF said that the UK would lead the G7 in growth terms, with economic expansion running at 2.9% in 2014 - something of a sea change from the 1.5% estimate for 2014 published last year. Sterling briefly touched $1.68 earlier this year, its highest level since 2009, and today’s move means that level is once again a short hop away.

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